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Proposed changes to lead and copper rule would mean higher costs

A statewide push to limit the presence of lead in water would come at a staggering cost to townships with their own water systems.

In the wake of the Flint water crisis, Gov. Rick Snyder and the state Department of Environmental Quality (DEQ) have proposed changing Michigan’s lead and copper rules to be more stringent than federal rules. These changes would require some utilities to replace their lead service lines over the next 20 years while also lowering the acceptable lead levels in water and stepping up testing requirements.

MTA fully supports protecting residents from lead exposure but is concerned that these proposed amendments place too heavy a burden on townships. We’re working with a coalition to offer suggestions for reducing lead exposure without significantly increasing costs for local units, for example, prioritizing at-risk populations such as schools and daycare centers. The DEQ is hosting a public hearing to take comments on this issue from 5-8 p.m. Thursday, March 1, at the Lansing Center. MTA encourages officials from townships that will be impacted to attend and voice your concerns at the March 1 public hearing or through written comments before the rules become final.

The deadline for public comments for the lead and copper rule is Wednesday, March 21, 2018, by 5 p.m. Written comments can be submitted by email to DEQ-LCR-Comments@michigan.gov or by mail to Drinking Water and Municipal Assistance Division, Michigan Department of Environmental Quality, Attn: Suzann Ruch, PO Box 30817, Lansing, Michigan 48909-8311.

The current version of Michigan’s lead and copper rule mirrors the U.S. Environmental Protection Agency’s (EPA) rules dictating acceptable lead levels. It states that if lead levels reach 15 parts per billion (0.015 milligrams per liter), it would set into motion several requirements to minimize lead exposure in drinking water, including water quality parameter monitoring, corrosion control treatment, source water monitoring/treatment, public education and lead service line replacement. The proposed rules would lower that action level to 10 parts per billion by Jan. 1, 2024—a level that about 300 water supplies exceeded in at least one sampling from 2000 to 2016.

Even further, the rule would require public water supplies (PWS) to remove lead service lines when the 90th percentile of tests exceed 5 parts per billion. Already, 152 systems fall into this category. Of those systems, there are 260,361 service connections—an estimated 40 percent of which are made of lead. With an average cost of replacement ringing up as much as $5,000 per line, the statewide estimated cost is an eye-popping $499 million, to be incurred over 20 years.

PWS that don’t exceed 5 parts per billion aren’t off the hook. They would still be required to address lead service line replacement in their asset management plans. Eventually, this would lead to all lead service lines being replaced.

Another major issue is the requirement that all PWS complete a detailed inventory of all distribution system materials, with a preliminary inventory due by Jan. 1, 2020. Then, locals would have until Jan. 1, 2024, to do the public outreach, records research, database maintenance, and potentially home inspections and partial excavations to finish a complete materials inventory. While about half of Michigan’s two million service connections are known and have confirmed composition, an estimated 50,000 will need to be at least partially excavated at a cost of $500 per service line. Between excavation and other inventory activity costs, this requirement would cost about $30 million statewide.

Townships that lose property tax revenue due to the disabled veterans property tax exemption could receive state reimbursement under a bill recently before the House Tax Policy Committee.

House Bill 4362, sponsored by Rep. Jeff Yaroch (R-Richmond), if enacted, would help offset losses local units have incurred for property tax exemptions to disabled military veterans and their unremarried, surviving spouses. MTA strongly supports this bill and urges members to contact their state representative asking them to support this legislation.

Under the act, this exemption applies to anyone who was honorably discharged from the armed forces and has been determined to be permanently and totally disabled as a result of military service, has a certificate from the U.S. Department of Veterans Affairs (VA) certifying that he or she is receiving or has received financial assistance due to disability for specially adapted housing, or has been rated by the VA as individually unemployable. The exemption continues when the disabled veteran dies, as long as the surviving spouse remains unmarried.

HB 4362 would require the state to reimburse each local taxing unit for its portion of the taxes upon which an exemption had been granted after Dec. 31, 2017. This change is expected to impact the state’s General Fund revenue by $20 million per year. However, because statute cannot mandate an appropriation, the Legislature and governor would need to appropriate the necessary funds.

The bill is similar to Senate Bill 723, which would also require the state to cover a local unit’s revenue losses due to the exemption. This would be subject to an appropriation and would cover any lost property tax revenue incurred after Dec. 31, 2017.

Townships with tax increment finance (TIF) authorities will face more reporting and transparency requirements under a bill streamlining Michigan’s statutes guiding this important economic development tool.

Many townships utilize TIF authorities as a vital part of their economic development. Under Michigan law, municipalities can use TIF authorities to capture growth in property tax revenues in a specific area, using the money to pay for eligible activities. For example, a TIF authority can be used to pay for infrastructure improvements, such as water or sewer projects, to bring in economic development. The problem is some are concerned that TIF authorities don’t have enough accountability or transparency as there is no deadline or penalty under current statute. SB 393 would standardize the reporting requirements and create penalties local units would face if they do not comply.

Six of the acts would have uniform reporting requirements—excluding the Nonprofit Street Railway Act, which covers the creation of a transit operations finance zone. Instead of submitting information to the State Tax Commission, each municipality with a TIF authority would be required to file annual reports with the Michigan Department of Treasury and post information either on the municipality’s website or a newly created website. Required information includes board meeting minutes, annual budgets and audits, currently adopted development plan, currently adopted TIF plan, authority staff contact information and a listing of current contracts. The website must also contain an annual updated synopsis of the authority’s activities, such as information on TIF revenues that aren’t spent within five years. If the municipality didn’t have a website and chose not to create one, the records must be maintained at a physical location within the municipality that’s open to the public.

SB 393 requires the Department of Treasury to create an annual reporting form for TIF authorities. MTA negotiated an amendment requiring the department to consult with local government associations when developing this form, and an amendment requiring Treasury to finalize and publish the form no later than 60 days after the bill’s effective date of Jan. 1, 2019. Authorities would be required to file each year with the department, which in turn will be required to compile a combined report each year summarizing the information reported, submitting a copy of that combined report to each member of the Legislature. Within 90 days of the effective date, each authority would be required to send the department a copy of, or link to, its current development or TIF plan.

Any authority that does not comply with the act would receive written notice from the Department of Treasury. If the authority still did not comply within 60 days, the authority could not capture any TIF revenues above the amount needed to pay its bonded indebtedness and other obligations for the noncompliance period. The authority also could not amend or approve a TIF plan during that period. If the noncompliance exceeded two consecutive years, the authority could not capture TIF revenue in excess of the amount needed for debt payment without a resolution of authorization from the local unit that created the authority, as well as each taxing jurisdiction whose taxes were subject to capture. Excess funds captured would have to be returned to the taxing jurisdiction.

Additionally, a TIF authority board must hold at least two informational meetings a year. Notice must be posted on the municipal or TIF authority website at least 14 days in advance, and the governing body of each taxing jurisdiction must receive a notice by mail 14 days in advance.

TIF authorities are important economic tools and MTA supported this bill for retaining townships’ ability to utilize these tools.

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